The company generated $898 million in cash from operations and returned $390 million to shareholders through stock repurchases and cash dividends.

“Applied Materials delivered the highest quarterly revenue and earnings in our history, and we’ve now set new earnings records for four quarters in a row,” said Gary Dickerson, president and CEO. “Across the company we have tremendous momentum as our markets are strong and getting stronger, and we’re sustainably growing faster than these markets by expanding our served opportunity and gaining share.”

Quarterly Results Summary

Change

Q2 FY2017

Q1 FY2017

Q2 FY2016

Q2 FY2017 vs. Q1 FY2017

Q2 FY2017 vs. Q2 FY2016

(In millions, except per share amounts and percentages)

Net sales

$

3,546

$

3,278

$

2,450

8

%

45

%

Gross margin

45.1

%

44.1

%

41.0

%

1.0

points

4.1

points

Operating margin

26.5

%

24.6

%

17.3

%

1.9

points

9.2

points

Net income

$

824

$

703

$

320

17

%

158

%

Diluted earnings per share

$

0.76

$

0.65

$

0.29

17

%

162

%

Non-GAAP Adjusted Results

Non-GAAP adjusted gross margin

46.3

%

45.4

%

42.7

%

0.9

points

3.6

points

Non-GAAP adjusted operating margin

27.8

%

26.0

%

19.2

%

1.8

points

8.6

points

Non-GAAP adjusted net income

$

861

$

732

$

376

18

%

129

%

Non-GAAP adjusted diluted EPS

$

0.79

$

0.67

$

0.34

18

%

132

%

A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.

Business Outlook

In the third quarter of fiscal 2017, Applied expects net sales to be in the range of $3.6 billion to $3.75 billion; the midpoint of the range would be an increase of approximately 30 percent, year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.79 to $0.87; the midpoint of the range would be an increase of approximately 66 percent, year over year.

This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.04 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

Second Quarter Reportable Segment Information

Semiconductor Systems

Q2 FY2017

Q1 FY2017

Q2 FY2016

(In millions, except percentages)

Net sales

$

2,404

$

2,150

$

1,587

Foundry

41

%

50

%

30

%

DRAM

19

%

16

%

20

%

Flash

33

%

25

%

42

%

Logic and other

7

%

9

%

8

%

Operating income

808

690

364

Operating margin

33.6

%

32.1

%

22.9

%

Non-GAAP Adjusted Results

Non-GAAP adjusted operating income

$

854

$

736

$

410

Non-GAAP adjusted operating margin

35.5

%

34.2

%

25.8

%

Applied Global Services

Q2 FY2017

Q1 FY2017

Q2 FY2016

(In millions, except percentages)

Net sales

$

724

$

676

$

633

Operating income

194

178

165

Operating margin

26.8

%

26.3

%

26.1

%

Non-GAAP Adjusted Results

Non-GAAP adjusted operating income

$

195

$

179

$

165

Non-GAAP adjusted operating margin

26.9

%

26.5

%

26.1

%

Display and Adjacent Markets

Q2 FY2017

Q1 FY2017

Q2 FY2016

(In millions, except percentages)

Net sales

$

391

$

422

$

187

Operating income

84

115

31

Operating margin

21.5

%

27.3

%

16.6

%

Non-GAAP Adjusted Results

Non-GAAP adjusted operating income

$

84

$

115

$

31

Non-GAAP adjusted operating margin

21.5

%

27.3

%

16.6

%

Use of Non-GAAP Adjusted Financial Measures

Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted to exclude the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; income tax items and certain other discrete adjustments. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

Management uses these non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of our performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

Forward-Looking Statements

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks, technology transitions, our business and financial performance and market share positions, our capital allocation, our development of new products and technologies, our business outlook for the third quarter of fiscal 2017, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials

Applied Materials, Inc. (Nasdaq:AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. Learn more at www.appliedmaterials.com.

1 Balances reflect the effects of the retrospective adoption of the authoritative guidance in the first quarter of fiscal 2017, which required debt issuance costs to be presented as a direct reduction from the carrying amount of the related debt liability. These amounts were originally recorded under Other Assets.

APPLIED MATERIALS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions)

Three Months Ended

Six Months Ended

April 30, 2017

January 29, 2017

May 1, 2016

April 30, 2017

May 1, 2016

Cash flows from operating activities:

Net income

$

824

$

703

$

320

$

1,527

$

606

Adjustments required to reconcile net income to cash provided by operating activities:

These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.

Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.